The long-delayed privatization IDBI The bank is witnessing renewed activity, with a new candidate reportedly joining the race. According to a report by NDTV Profit, Kotak Mahindra Bank has expressed interest in acquiring a significant stake in the lender. The bank now appears alongside global investment firms Oaktree Capital and Fairfax, which were already seen as active suitors in the earlier stages of the process.
NDTV’s earnings report highlights several challenges being considered by potential bidders, the most notable being IDBI Bank’s sizeable market capitalization, which currently stands at around Rs 1 lakh crore. Acquiring a 60 percent stake at this valuation would require large initial capital, making it difficult for most investors to close the deal with cash only. However, Kotak Mahindra Bank, which has a market capitalization of around Rs 4.14 lakh crore, may consider a merger structure with part equity and cash to make the acquisition financially feasible. Such a structure would allow Kotaku to use its capital currency as part of the fee, reducing the capital burden.
If Kotak’s interest is confirmed, it could change the competitive landscape for the sale of IDBI Bank. Fairfax and Oaktree have been involved in the process for months, but the entry of a large domestic bank from the private sector would introduce a new strategic dimension. The government could see Kotak, with its strong retail franchise and track record of successful integrations – most notably the ING Vysya merger – as a capable steward of IDBI’s future.
Earlier this week, the government indicated that a request for proposal (RFP) for the sale would be released soon. The Center has repeatedly stated its goal of completing the privatization by March 31, 2026. Under the current structure, the government and LIC together plan to sell 60.72 percent of their joint shares, transferring full management control to the acquirer. After the transaction, the government is expected to retain a 15 percent stake, while LIC’s stake will be reduced to approximately 19 percent.
In the initial phase of privatization, Emirates NBD and Fairfax emerged as key suitors and even conducted extensive due diligence. However, Emirates NBD recalibrated its ambitions for India after it announced a $3 billion investment to acquire a majority stake in RBL Bank, effectively excluding itself from the IDBI bidding process. This made Fairfax the most active suitor until Kotak’s name appeared in the latest media report.
In a separate corporate development, Kotak Mahindra Bank on Friday announced a 5 for 1 stock split. Shareholders holding one share of face value Rs 5 will get five shares of face value Rs 1 each. The bank said the move was aimed at improving public participation and making shares more affordable. Kotak last conducted a stock split in 2010 and later issued bonus shares in 2015. The split also coincides with the bank completing 40 years in business.
In the meantime, the wider process of privatization progressed. A Reuters report recently noted that the government has completed due diligence for the stake sale and intends to launch financial bids between October and December this year. The divestment was first announced in 2022, and LIC’s reclassification from “promoter” to “public shareholder” earlier this year was seen as a key step in removing management hurdles to the sale. This change deprives LIC of representation in the board and of strategic influence, harmonizing its role with that of a financial investor.
Shares of IDBI Bank closed at Rs 100.25 on the BSE, down 2.53 percent in Friday trade.
(With information from Reuters)
